President Trump’s proposed budget seeks to rein in federal expenditures for the Supplemental Nutrition Assistance Program (SNAP). It’s fair for progressives to debate the merits of SNAP, but many on the left and their media surrogates argue that spending less on SNAP would hurt the broader economy. See, for example:
https://www.nytimes.com/aponline/2017/05/24/us/ap-us-food-stamps-cuts-economy.html
The argument goes something like this. If you cut SNAP, its recipients wouldn’t be able to spend as much on food, or they would have to spend money on food that might have been spent on something else. Either way, the ripple effect would hurt grocers and other retailers, and then farmers and manufacturers, resulting in a broad slowdown in the economy. They invoke an economic term, the multiplier effect, to legitimize their claim. But there is one major question they don’t ask.
Where does Washington get the funds to pay for SNAP? There are three options. First, if taxes are used, then any increase in economic activity promoted by SNAP is automatically balanced by a decrease in economic activity for taxpayers who have less to spend or invest. Second, if we borrow to pay for SNAP, then the economic activity it promotes will be balanced by a decline when future generations have to pay it back. Finally, if we “print money” to pay for it, then the purchasing power of the dollar declines proportionally, thereby creating an invisible tax on all wealth.
Economists like to say that there is no such thing as a free lunch, and that’s certainly the case here. There are different ways to break down SNAP expenditures, but they must come from a combination of these three options. There’s no other alternative. Claiming that SNAP—or any other social program—helps the economy by injecting money that gets “multiplied” is ignoring this reality. While it is true that SNAP changes could help or hurt certain industries, the net effect must balance.
So why do progressives make this claim whenever “cuts” are proposed to social programs? Some are pandering for votes, but others just don’t understand basic economics. They’ve been overloaded with Keynesian thinking for so long that they believe government spending is always required to “jumpstart” a weak economy. They overlook free enterprise, the stifling effect of regulations, harmful incentives created by government programs, and real people who have to pay the bills. This is why our national debt has risen to $20 trillion, with no end in sight.
This argument is ridiculous. It doesn’t matter who spends the money or where you get it from, you have the same amount. Trump has played into the hand by claiming that infrastructure spending will stimulate the economy.
It’s not ridiculous. Poor people who get SNAP need it, and they create jobs when they buy food. Why does anyone think this isn’t good for the economy?
what are you talking about gjackson? The money they spend comes from taxpaers who can’t spend it instead. it’s the same amount. no change.
There is a change tw. Poor people on SNAP spend money they couldn’t spend without government help. Just ask Walmart.
This is just more Keynesian logic. The democrats never think that they money they spend has to come from somewhere. As tw said, increasing SNAP doesn’t do anything for the economy.
This isn’t very complicated. If you can’t follow the logic then you can’t understand economics 101.